The Pakistan Microfinance Network (PMN) – a national association of over 50 microfinance providers (MFPs) – has supported its members in conducting third-party client protection assessments using the Smart Campaign’s Smart Assessment tool. To date, 18 assessments have been conducted, covering over 60 percent of the market in terms of overall outreach to active borrowers. These assessments have been made possible with funding support from the State Bank of Pakistan (SBP) through the UK Aid-sponsored Financial Inclusion Program (FIP). The assessments provide a unique opportunity for PMN to observe the state of practice in client protection among member MFPs. For participating MFPs, the assessments provide an opportunity to evaluate their practices in comparison with globally accepted standards of client protection, and seek recommendations for institutional improvements to better comply with the standards. They also indicate whether an institution is ready to pursue Smart Certification, a designation recognized across the global market that an institution successfully integrates the Client Protection Principles into their practices. After undergoing an assessment and acting on its results, Kashf Foundation (KF) recently became the first microfinance institution in Pakistan to achieve Smart Certification.

The Pakistan Microfinance Network, a strategic partner of the Smart Campaign, sat down with Roshaneh Zafar, Managing Director of Kashf Foundation, to talk about the certification experience.

Roshaneh Zafar (RZ): From the beginning, Kashf Foundation has been focused on providing client centric services and “delighting” the client through customer care, respect, and upholding their dignity. As the institution has grown we have worked to embed client centricity in all aspects of our operations. We are very proud to be the first Smart Certified institution in Pakistan, as this demonstrates our longstanding commitment to our clients. This certification underlines the importance we place on transforming the lives of the women that we serve.

When the opportunity for a third-party assessment of institutional processes and procedures was highlighted for PMN members, we were one of the first to volunteer. We wanted to assess gaps that may exist and also harness international standards and best practices to help us “walk the talk”. A third-party Smart Assessment was conducted in 2013 and I am very happy that Kashf’s policies and procedures passed this test with flying colors – a testament to our focus on client centricity and responsible practices. With the completed assessment, the next step was publicly demonstrating our commitment to our clients and pursuing certification.

PMN: What do you think is the benefit of being Smart Certified?

RZ: This certification validates the efforts that Kashf has undertaken to protect our clients and remain client centric in the face of pressures to increase outreach, efficiency, and technology leverage. Client protection is a conscious decision that Kashf has made and institutionalizing it has been a process of exchange and learning from the clients. An international recognition of these standards will help stakeholders, including clients, understand our level of commitment to our clients and our priority of aligning products, services, and procedures to their needs. The Smart Certification indicators, based on the seven Client Protection Principles, reflect Kashf Foundation’s social performance objectives and our strong sense of responsibility towards our clients. Our certification also sets an example for other MFPs in Pakistan.

PMN: Can you share any client protection practices that are unique to Kashf Foundation?

RZ: For all clients, Kashf undertakes a detailed cash-flow analysis of the household’s business flows and guides clients on better financial management through tailored trainings to improve savings, budgeting, and debt management. Moreover, Kashf Foundation gathers client feedback through multiple mechanisms including quarterly meetings of the Women Entrepreneurs Council (WEC) (comprised of regionally representative clients and Kashf management), annual client satisfaction surveys, and regularly-held staff discussions. Kashf also has a compliance department which not only oversees institutional policy compliance but also undertakes independent surprise visits to clients to gauge their satisfaction and gather complaints and feedback.

Roshaneh Zafar (second from left) with clients at a Kashf Foundation-hosted International Women’s Day event

Even before this certification, Kashf Foundation was using an in-house Social Performance Dashboard to monitor and improve institutional compliance to the universal standards for social performance management (USSPM). The Dashboard provided all internal stakeholders with a quick check point for targets and achievements on indicators relevant to our social objectives. The dashboard thus allows the board of directors, top management, and staff to routinely monitor and review institutional progress. This has been one of the biggest drivers within the institution to maintaining strong client protection practices among staff of all levels. Additionally, the first MFI in the country market to do so, Kashf developed and implemented a Consumer Protection Code outlining the institution’s client protection practices, which is signed by all Kashf employees.

As a result of these efforts, the institution is stronger. Kashf now follows an individual lending model tailored to each client, has increased the maximum loan size of our most popular loan product, and introduced an efficient process for streamlining disbursement. Kashf offers a range of client-specific products like Shariah-compliant services tailored to the needs of those in the Khyber Pakhtunkhwa (KPK) Province, and a tiered loan-and-capacity-building service for (primarily female) low-cost private school owners. KF has also set up business incubation labs across several regions aimed at increasing the technical and financial capacity of women-owned businesses.

PMN: What has been the biggest driver at the institution-level for having good client protection practices?

RZ: Kashf’s core mission and commitment to empower low-income households, especially women, has been the biggest driver of good client protection practices. Ownership, especially at management levels, of consumer protection and transparency sets a good example for the entire institution to follow. The Kashf Board, for example, has a strong vision to promote women-centric financial services. At Kashf we do not compile or group together client complaints, instead we analyze all complaints on a weekly basis with clear follow-ups for relevant staff. If I as the Managing Director can take time out to follow-up on client issues and complaints, it sets the tone for all other staff members at Kashf. Moreover, client satisfaction and its accompanying benefits such as high staff morale and motivation, high client retention, and low levels of PAR also positively reinforce consumer protection.

PMN: How would you describe the client protection landscape in the overall sector?

RZ: The microfinance sector in Pakistan is diverse, including various types of providers like microfinance banks, microfinance institutions, and NGOs, providing micro-credit along with other services. Since a common regulator amongst these various types of institutions does not exist, client protection compliance varies according to the regulatory frameworks. And even within the realm of regulatory compliance, entities which are more mission-oriented may perform better than others. An important step towards client protection has been the introduction of the Microfinance Credit Information Bureau; however, the challenge remains to ensure that all MFPs are reporting data and using responsible thresholds in the case of parallel loans.

Interventions such as Smart Assessments and Certification play an important role in mainstreaming client protection across the market. Of course, since these are voluntary, not all institutions, especially those with weak client protection, may opt in. The industry needs more institutions participating in these programs to create positive market pressures on all to treat clients well.

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